The Department of Defense could reduce costs of its Pacific region presence by developing comprehensive cost information and re-examining alternatives to planned initiatives.

Why This Area Is Important

According to the 2010 Quadrennial Defense Review, approximately 400,000 U.S. military personnel are forward-stationed or rotationally deployed, or postured, around the world on any given dayincluding those involved in operations in Afghanistan and Iraq. In addition to the costs of supporting ongoing combat operations, the Department of Defense (DOD) spends billions of dollars annually on its network of installations around the world that supports its overseas defense posture. In last years report on opportunities to reduce potential duplication in government programs, GAO reported that DOD should assess the costs and benefits of its overseas installations before committing to costly realignments and construction plans. For this years analysis, GAO is focusing on DODs presence in the Pacific region.

As GAO reported in May 2011, from 2006 through 2010, DOD obligated $24.6 billion to build, operate, and maintain installations in support of its defense posture in the Pacific. Additionally, the report stated that DOD is currently conducting the largest transformation of its defense posture in the Pacific since the end of World War II, including initiatives that will cost billions of dollars in resource investments and take many yearsperhaps decadesto complete. Although DODs new defense strategy identifies U.S. presence in the Pacific as important, questions have arisen about the magnitude and costs of overseas basing projects and whether DODs planned investments support a coherent and affordable strategy.

What GAO Found

Although DOD has taken steps to improve its planning for overseas defense posture, it has not fully identified costs or provided an analysis of alternatives for basing U.S. forces in the Pacific. Having U.S. troops permanently stationed overseas provides benefitssuch as deterring aggression against U.S. alliesbut it incurs significant costs. In previous GAO reports on overseas defense posture, GAO emphasized the need for DOD to assess the costs and benefits of options for the U.S. overseas military presence before committing to costly personnel realignments and construction plans. However, in the case of DODs overseas presence in the Pacific, GAO found that comprehensive cost information is not systematically used to inform DODs planning for its overseas defense posture. As a consequence, DOD and Congress lack reasonable assurance that overseas presence in the Pacific is being planned and implemented in a cost-effective and financially sustainable way. Reliable and complete cost estimates are critical to allow analyses of alternatives and oversight by decision makers.

As GAO reported in May 2011, several evolving defense posture initiatives in the Pacific have the potential to cost the department billions of dollars. Through informed decision making based on comprehensive information and analysis of alternatives for some of its planned defense posture initiatives in that region, DOD may be able to reduce some of these costs. For example:

South Korea tour normalization initiative. DOD is transforming its defense posture in South Korea through a series of interrelated initiatives that DOD estimates will total $17.6 billion through fiscal year 2020. The largest of these initiatives, tour normalization, would increase the tour lengths of personnel stationed in South Korea and move thousands of military dependents to South Korea. According to DOD officials, the decision to move forward with tour normalization was made to achieve certain strategic objectives, such as providing military commanders greater flexibility in how U.S. military forces assigned to South Korea are used and to improve the quality of life for military service members and their families. This initiative alone could cost DOD $5 billion by fiscal year 2020 and $22 billion or more through 2050; however, prior to making the decision to move forward with the tour normalization initiative, DOD did not complete a business case analysis that would have considered alternative courses of action for achieving its strategic objectives, and the costs and benefits associated with any alternatives. Potential alternatives might be to maintain current primarily 1-year unaccompanied tour lengths, partially implement tour normalization at select locations, or other possibilities that would help achieve United States Forces Koreas strategic objectives. DOD is embarking on an initiative that involves moving thousands of U.S. civilians to locations in South Korea, mainly Camp Humphreys, and constructing schools, medical facilities, and other infrastructure to support themwithout fully understanding the costs involved or considering potential alternatives that might more efficiently achieve U.S. strategic objectives.

Japan and Guam realignment initiatives. DOD has embarked on a major realignment of its defense posture in mainland Japan, Okinawa and Guam but has not developed comprehensive cost estimates for this work. Approximately $29.1 billion in costsprimarily in construction costsis anticipated to be shared by the United States and Japan to implement these realignment initiatives. DOD officials stated that total cost estimates for these initiativesincluding operation and maintenance costs to DODwere not available because of the significant uncertainty surrounding initiative-implementation schedules. In February 2012, the United States and Japan released a joint statement indicating that the two governments have started official discussions to revise current posture plans, specifically the plans to relocate the Marines to Guam. In July 2010, the Senate Appropriations Committee directed DOD to provide status updates on defense posture initiatives in Korea, Japan, Guam, and the Northern Mariana Islands, as an appendix to the annual DOD Global Posture Report, to address such items as schedule status, facilities requirements, and total costsincluding operation and maintenance costs. These updates should be provided annually, beginning with the submission of the fiscal year 2012 budget request, until the restructuring initiatives are complete or funding requirements to support them are satisfied. The Committee renewed its direction in June 2011. If DOD is fully responsive to the Committees reporting direction, these updates should provide needed visibility into the cost and funding of the initiatives. According to DOD officials, DOD will submit an appendix as part of its 2012 Global Posture Report that includes updates to posture initiatives in Korea, Japan, and Guam. They anticipate the report will be issued in the spring of 2012.

U.S. Pacific Command operation and maintenance costs. Service officials estimated that operation and maintenance costs for installations in the Pacific region would be about $2.9 billion per year through 2015.[1] However, GAO found that, of the approximately $24.6 billion reported as obligated by the military services to build, operate, and maintain installations in the Pacific from 2006 through 2010, approximately $18.7 billionor about $3.7 billion per yearwas for operation and maintenance costs, an increase of over 27 percent per year over the service officials estimate through 2015.[2] Further, the planned defense posture initiatives in South Korea, Japan, and Guam may significantly increase operation and maintenance costs over the long term, potentially through 2015 and beyond. For example, DOD has yet to estimate costs associated with furnishing and equipping approximately 321 new buildings and 578 housing units in Okinawa. In the United States Department of Defense Fiscal Year 2011 Budget Request Overview, prepared by the Office of the Under Secretary of Defense (Comptroller), DOD outlined the need to reform the way it buys its weapons and other important systems and investments, including strengthening front-end scrutiny of costs and not relying on overly optimistic or underestimated cost estimates. In June 2011, DOD revised posture-related guidance to require full project costs, including any operation and maintenance costs, for all ongoing, current, and 5-year planned posture initiatives to be submitted as part of a combatant commanders theater posture plan. In the October 2011, U.S. Pacific Commands Theater Posture Plan, neither operation and maintenance, nor total costs for posture initiatives had yet been included. GAO will continue to monitor future updates to the plan.

[1]Operation and maintenance funding provides for a large number of expenses. With respect to DOD installations, operation and maintenance funding provides for such aspects as base operation support and sustainment, restoration, and modernization of buildings and infrastructure.

[2]These costs do not include (1) supplementary funding provided to support ongoing operations, (2) costs reimbursed by tenant organization at installations in the U.S. Pacific Commands area of responsibility, and (3) personnel costs for troops stationed at installations in the U.S. Pacific Commands area of responsibility.

Actions Needed

To provide DOD and Congress with the comprehensive defense posture cost information needed to fully evaluate investment decisions and the affordability of defense posture initiatives, GAO recommended in May 2011 that the Secretary of Defense

identify and direct appropriate organizations within DOD to complete a business case analysis, including an evaluation of alternative courses of action, for the strategic objectives that have to this point driven the decision to implement tour normalization in South Korea;

identify and limit investments and other financial risks associated with construction programs at Camp Humphreys, South Korea, that are affected by decisions related to tour normalization until a business case analysis is reviewed and the most cost-effective approach is approved by the Secretary of Defense; and

direct the Secretaries of the military departments to develop annual cost estimates for defense posture in the Pacific that provide a comprehensive assessment of defense posture-related costs, including costs associated with operating and maintaining existing defense posture, as well as costs associated with defense posture initiatives, in accordance with guidance developed by the Under Secretary of Defense (Comptroller).

Additionally, in light of the United States and Japans joint statement announcing discussions to revise U.S. posture plans in the Pacific, it will be critical for DOD to develop comprehensive cost estimatesincluding estimates of operation and maintenance costsas it evaluates cost effective alternatives for the future. To facilitate congressional oversight of plans to realign U.S. defense posture in the Pacific, and to provide reasonable assurance that DOD will take all appropriate measures to mitigate financial risks and better define future requirements, the Secretary of Defense should provide Congress

specifics regarding corrective actions the department plans to take; and

time frames for completion.

By assessing alternatives, conducting comprehensive cost analyses, and providing comprehensive annual defense posture cost estimates, DOD will be in a better position to fully evaluate investment requirements, and make more informed decisions regarding the affordability of its overseas defense posture. Furthermore, congressional committees will have the appropriate financial context to determine funding needs for specific posture-related initiatives and construction programs. Cost savings or avoidance would depend on the nature of changes made to DODs plans and how DOD implements its chosen options.

How GAO Conducted Its Work

The information contained in this analysis is based on findings from the reports listed in the related GAO products section. GAO assessed DOD policies and procedures, interviewed relevant DOD and State Department officials, and analyzed cost data from the military services.

Agency Comments & GAO Contact

GAO provided its May 2011 report to DOD for review and comment. DOD agreed with GAOs recommendations and stated that it would work with its components to implement them. Insufficient time has passed since the issuance of the report for GAO to fully evaluate DODs implementation. As part of its routine audit work, GAO will track the extent to which progress has been made to address the identified actions and report to Congress.

For additional information about this area, contact Brian J. Lepore at (202) 512-4523 or leporeb@gao.gov.